Constance Hotels Services Limited | Annual Report 2025

159 ANNUAL REPORT 2025

Notes to the Financial Statements Year ended December 31, 2025

Notes to the Financial Statements Year ended December 31, 2025

2. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (CONT’D) 2.2 Material accounting policies (cont’d)

2. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (CONT’D) 2.2 Material accounting policies (cont’d)

(e) Property, plant and equipment

(f) Leases (cont’d)

Group and the Company as a lessee

Property, plant and equipment (except for freehold land) are stated at historical cost less accumulated depreciation and impairment. Freehold land is stated at revalued amounts and is not depreciated. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the Company and the cost of the item can be measured reliably. Increases in the carrying amount arising on revaluation are credited to revaluation reserves in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against the revaluation reserve; all other decreases are charged to the profit or loss.

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

i)

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.

Depreciation is calculated using the straight line method to write off the cost of assets, or the revalued amounts, to their residual values over their estimated remaining useful life as follows:

Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:

Buildings

2.0% - 10.0%

• Land and building • Leasehold land

15 to 20 years 3 to 60 years 3 to 5 years 5 to 10 years 5 to 7 years

Computer equipment

20.0% 10.0%

Plant & machinery

• Computer equipment • Plant and machinery

Vessels and motor vehicles Furniture, fittings & linen

14.0% - 20.0%

• Motor vehicles

10.0%

If ownership of the leased asset transfers to the Group and the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, at the end of each reporting period.

The right-of-use assets are also subject to impairment. Refer to the accounting policies in section Impairment of non-financial assets.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

ii)

Lease liabilities

Gains and losses on disposals of property, plant and equipment are determined by comparing proceeds with carrying amount and are included in profit or loss. On disposal of revalued assets, the amounts included in revaluation reserve are transferred to retained earnings. Work-in-progress primarily comprises costs incurred for renovation activities that remain incomplete as of the reporting date. These are measured at cost, net of any accumulated impairment losses. Upon the completion of construction, the asset is reclassified to its appropriate asset category and subsequently measured at cost, less accumulated depreciation.

At the commencement date of the lease, the Group and the Company recognise lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group and the Company exercising the option to terminate.

(f) Leases

Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

The Group and the Company assess at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. Refer to Note 6 for more details.